NO INSURANCE = PENALTY?

No Health Insurance Still Means Big Penalties

3860 Crenshaw Bl., #217  •  Los Angeles, CA 90008
Phone: 323.292.5407 • Fax: 877.690.7818 • Ontario: 909.428.1151
www.taxdoc4u.comtaxdoc4u@gmail.com
Tax Tips

Weekly Tax Tip

No Health Insurance Still Means Big Penalties
Avoid this tax penalty by taking action now

Category:
Planning

Planning category image

If you think President Trump’s recent executive order means that the fees for not having health insurance are no longer in effect, you could be sorely mistaken. To avoid potentially thousands of dollars in “shared responsibility” tax penalties, you still need to be covered by a basic level of health insurance.

Current Situation

During his first week in office, President Trump signed an executive order asking federal agencies to reduce the economic burden on American citizens due to the Affordable Care Act (ACA).

Unfortunately, this executive order is causing confusion and a false sense of security that the fines and rules no longer must be followed. Unless the actual laws are changed, including the tax code, you could be in for a very unpleasant surprise when you file your tax return in 2016 and 2017 if you do not have qualified health insurance.

A potential $2,000 plus penalty

The “shared responsibility” penalty for not being covered by a minimum level of health insurance costs a minimum of $695 per adult and can range as high as 2.5 percent of your annual income above the federal filing threshold. The penalty is capped at the annual cost of a basic “bronze-level” plan in the healthcare marketplace. Here is the calculation of the penalty.

Shared Responsibility Payment Calculation

Fortunately, there are exceptions that can reduce or eliminate this penalty. The most common include short gaps in health insurance coverage and exceptions for lower income taxpayers.

What to do

The chatter out of Washington is that there will be major changes in the ACA. This could mean an elimination of the individual mandate that results in no longer having a shared responsibility tax payment. But for this to happen Congress must pass legislation. It cannot be undone by an executive order.

No one knows exactly what ACA changes will be passed into law. In the meantime, the best defense against the shared responsibility payment is to get health insurance coverage. The sooner you do, the less chance of an unwanted tax bill at the end of the year. If you do not, at least plan for the required payment when you file your tax return. No one likes a potential $2,000 tax surprise.

Star line
Published: 02/10/2017 12:00 PM
This publication provides summary information regarding the subject matter at time of publishing. Please call with any questions on how this information may impact your situation. This material may not be published, rewritten or redistributed without permission, except as noted here. This publication includes, or may include, links to third party internet web sites controlled and maintained by others. When accessing these links the user leaves this web page. These links are included solely for the convenience of users and their presence does not constitute any endorsement of the Websites linked or referred to nor does Call the Tax Doctor have any control over, or responsibility for, the content of any such Websites.
All rights reserved.